3 Top Stock Picks In The Pharmaceutical Sector Analyzed; The Wall Street Transcript Interview With Dr. Jon LeCroy, M.D., - MKM Partners
December 28, 2011 - The Wall Street Transcript has just published Biotechnology and Pharmaceuticals Report offering a timely review of the sector. This Special Report contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. Please find an excerpt below.
Recent Wall Street Transcript Special Reports.
Dr. Jon LeCroy, M.D., joined MKM Partners in June 2011 as an Analyst covering the biotechnology/specialty pharmaceuticals sector. Dr. LeCroy previously covered the same sector at Hapoalim Securities USA, Inc.; Natixis Bleichroeder LLC; and Goldman Sachs. He ranked number five in this year's The Wall Street Journal Best on the Street poll in biotechnology. Dr. LeCroy holds an MBA from Boston University's Graduate School of Management, an M.D. from the University of South Florida College of Medicine and a B.S. in biology from Wake Forest University.
TWST: What is your coverage in the pharma sector?
Dr. LeCroy: Right now, I cover Pfizer (PFE) and Bristol-Myers (BMY). I have covered all the U.S. names in the past, which really is only Pfizer, Bristol-Myers, Merck (MRK) and Eli Lilly (LLY). I also cover eight specialty pharma/biotech names, and I'm still adding coverage every few weeks to a month.
TWST: What are the big themes your are watching in your coverage right now?
Dr. LeCroy: The two big drivers are pipeline and the patent exposure for the big companies, and how those two areas interplay. The pipeline tends to affect valuation more than the other aspect. So companies with a good pipeline, regardless of their patent exposure, tend to get a better valuation. That's clearly been the case of Bristol-Myers. Bristol-Myers has a very solid late-stage pipeline, and as a result, they have been able to hold a premium to the group for a few years now.
TWST: What's your view on Pfizer right now and why?
Dr. LeCroy: We like Pfizer. All of the pharma companies are having similar issues in that they were ordering more drugs than they're making, and they all have heavy, heavy patent exposure. So because of that, we think their evaluation should be a little closer than they are currently. You have Bristol off to one end, then the rest of the names are much, much cheaper. From Pfizer's perspective, when we look out four or five years at the pharmaceutical market as a whole, the companies tend to have relatively flat earnings over the next five years. Because of that, we think Pfizer deserves their current multiple and any trading at a fairly heavy discount.
TWST: Who do you like in the spec pharma/biotech space and why?
Dr. LeCroy: Interestingly, a company we really liked came out today with negative data for a depression drug. That company is Targacept (TRGT).
TWST: If something like that happens, where a trial produces negative results, does the company typically go back and redo the trial?
Dr. LeCroy: In the case of Targacept, they are running what's called an augmentation depression trial. Many patients fail on antidepressants, with many patients still depressed after 12 weeks or so on therapy. Most of the SSRIs right now are generic, such as Prozac. So in general, the market in depression is really for either add-on therapy or some new type of therapy.
The drug Targacept had a nicotine receptor blocker, and they were trying it as add-on therapy. Their patients first failed on antidepressant and then the ones who did fail that would then get added to another placebo. They were running four major trials with AstraZeneca (AZN), and the one that failed out today was the first of the four. So they still have three trials that are wrapping up now, but the company didn't give a lot of data, but they said there wasn't a separation from placebo, implying that drug really didn't work at all. There is still a shot that one or more of the additional trials would work, but right now it's not looking that great.
TWST: Are there other companies you like?
Dr. LeCroy: Yes, for example, there is a company called Neurocrine (NBIX), and Neurocrine has a deal with Abbott (ABT) for a drug for endometriosis. It's a female health condition. That drug right now is entering Phase III for endometriosis, and they are also running a Phase II trial for uterine fibroids. They have a drug that worked very well on Phase II, and they ended up getting a deal with Abbott, and they are running a full global Phase III program now. The trial is rolling now, so they really won't have data until 2013. They also have a follow-on drug, a different type of drug for a side effect of the medicine used to treat schizophrenia. The antipsychotics can cause a rigidity disorder called tardive dyskinesia. They have a Phase II trial they are starting now that will have data in the first quarter of 2012 for tardive. That looks interesting as well.
The remainder of this 30 page Biotechnology and Pharmaceuticals Report can be immediately viewed by purchasing online.
The Wall Street Transcript is a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.
The Wall Street Transcript does not endorse the views of any interviewees nor does it make stock recommendations.
For Information on subscribing to The Wall Street Transcript, please call 800/246-7673